A new study has revealed that almost a third (30 per cent) of UK adults do not fully understand key Inheritance Tax (IHT) terminology, while a similar number are unaware of the rate at which IHT is charged.
The research, which was carried out by insurance broker Alan Boswell Group, reveals that only 27 per cent of Britons aged 55 and above are aware that their estate will become liable to pay IHT if it exceeds the ‘nil rate band’ of £325,000.
In addition, less than half (44 per cent) understand that IHT is charged at a hefty rate of 40 per cent on the total value of any estates that exceed this threshold.
The study’s authors said that the lack of awareness of ‘key IHT terminology’ among UK adults was a cause for concern – and that people needed to plan ahead, as an ever-increasing number of British families are finding themselves liable to pay IHT each year.
They said that this was largely due to the fact that property prices have increased by an average of a third (33 per cent) since 2010, yet the £325,000 IHT threshold has remained ‘frozen’ since that time.
Fortunately, there are a number of ways that British families and individuals can mitigate their IHT liability.
For example, those who wish to pass property to direct beneficiaries in their Wills can make use of the additional residence nil rate band, which can enable individuals to pass on an additional £125,000 in property value tax-free.
Meanwhile, leaving a charitable legacy in your Will can also make for some significant tax savings if appropriate legal advice has been sought.